Essay About Privatization Of Social Security And Future State Of Social Security

Privatization of Social Security
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Recently, the future state of Social Security has been a hot issue in our country. Some
feel that the remedy for any future problems is the privatization of Social Security. While this
may be good on paper, it is a horrible idea. The national government is pushing more in
favor of privatization of Social Security, and will indeed affect Americans in a negative way
because future retirees won’t be protected against inflation, it has been unsuccessful in other
countries, and people will not have total control over their money in private accounts due to the
unexpecting fluctuation of the stock market.
It is important that our future retirees be granted the benefits that they deserve.
With the privatization of Social Security however, due to inflation this will be near impossible
to complete. One of the factors of privatization is that people will be charged for the interest rate
of inflation and an additional three percent to compensate for the federal money that was used to
create the account. I feel that this is ludicrous because in history it has been proven that inflation
has hurt the stock market. The government is unable to always control inflation. If it was
controllable then this crisis could have been avoided in the past. If this pattern continues, and
it most likely will, people with private accounts will end up getting hit with higher interest rates.
In return, these people will have less money in their actual accounts because they have to pay
off the high interest rates that were caused by inflation just so they could have the account. Also
under the current proposed plan it is required that all privatization plans be converted to annuity
that will make payments to them in monthly installments for their lifetime. If inflation
protection is not then provided for these annuities it will be a disaster. When inflation occurs the
buying power of those monthly payments will decrease, thus making these retirees unable to
purchase as many necessities to live. If an inflation protection plan is implemented then it will
more than likely prove to be very expensive. Which will then in-turn cause a cut back in
monthly benefits at the outset of the program. All in all, future retirees will not see the benefits
and rewards of their hard work due to most of it being lost to rising interest rates they will have
to pay.
Secondly people who support privatization seem to fail to realize just how unsuccessful
this plan has been in other nations. The first and most famous nation for implementing this was
Chile, who did so in 1981. Now 24 years later, Chile’s social security system is in such a mess
that all of it’s political parties agree, regardless of beliefs, that it should be abolished as soon as
possible. Supporters of privatization list Chile’s system as a great example and success.
However, it is crazy to do so because this was done out of impending collapse of Chile’s
financial system. It was not done to better Chile, but was created as a quick fix for the mess.
The military dictatorship in control at the time, had made of the economy. As a result, many
other Latin American countries who were in the same financial system followed suite.
Therefore, this action made South America’s economy as a whole a disaster for many years to